Algeri, in the matter of Gem Management Group Pty Ltd (in liq) [2022] FCA 1229

Algeri, in the matter of Gem Management Group Pty Ltd (in liq) [2022] FCA 1229

Due to unreliable records and the impossibility or excessive cost of tracing actual investor contributions, the fairest method is to pay liquidators' costs and unsecured trade creditors in priority and then distribute the remaining trust assets pro rata among all claimants (including unitholders, sub-trust investors, and other contributors) as assessed by the liquidators following a proof of claim process, treating all those who intended to invest in the scheme equally, regardless of investment method.

Jurisdiction
Australia
Judgment Date
17 October 2022
Procedural Posture
Originating Process (application in Liquidation) / Determination of Application for Directions/orders in Liquidation
Outcome
Orders made as sought by liquidators: liquidators justified in adopting the pro rata distribution approach for the trust assets, process for proofs of claim approved, and relief from liability granted for distributions made under these orders.
Legal Topics
['distribution of Trust Assets' 'managed Investment Schemes' 'powers of Liquidators' 'pro Rata Distribution' 'priority of Creditors']
['corporations Law' 'equity and Trusts' 'insolvency Law'] ['distribution of Trust Assets' 'managed Investment Schemes' 'powers of Liquidators' 'pro Rata Distribution' 'priority of Creditors']

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Procedural Posture

Originating Process (application in Liquidation) / Determination of Application for Directions/orders in Liquidation

Legal Issues

  1. 1 ['What is the appropriate method for distribution of trust assets among investors and unsecured creditors in the liquidation of a company acting as trustee of a managed investment scheme with unreliable records and mixed investor contributions?' 'Are the liquidators justified and acting reasonably in proposing a pro rata distribution method that includes all investors regardless of method of investment?' 'Does the court have power to make the orders sought under the Corporations Act 2001 and relevant Trustee Acts, and should relief from liability be granted to the liquidators for following the proposed process?']

Ratio Decidendi

Due to unreliable records and the impossibility or excessive cost of tracing actual investor contributions, the fairest method is to pay liquidators' costs and unsecured trade creditors in priority and then distribute the remaining trust assets pro rata among all claimants (including unitholders, sub-trust investors, and other contributors) as assessed by the liquidators following a proof of claim process, treating all those who intended to invest in the scheme equally, regardless of investment method.

Court Disposition

Orders made as sought by liquidators: liquidators justified in adopting the pro rata distribution approach for the trust assets, process for proofs of claim approved, and relief from liability granted for distributions made under these orders.

Orders

  • ["Liquidators justified and acting reasonably in paying, out of the assets of the Trust: first, liquidators' remuneration (as approved), disbursements and legal costs; second, payment in full to current unsecured trade creditors whose claims are admitted; third, the balance to a 'Common Fund Account' for...